Micro, Small and Medium enterprises (MSMEs) comprise a pivotal sector of the Indian economy, employing the largest work force among all sectors other than agriculture, promoting entrepreneurship, and contributing significantly to economic growth. However, even as its importance is widely acknowledged, the MSME sector has historically found itself deprived of timely and adequate institutional finance. The primary reason for this has been the lack of credible information on the functioning and performance of the MSME sector. One way to bridge this “information gap” and thereby improve the sector’s access to institutional finance is to encourage MSMEs obtain credit ratings from credible credit rating agencies.

Benefits:

For lenders , an ICRA MSME Rating would:

Provide an objective, independent and reliable opinion on credit quality.

Serve as an additional input in the credit decision making process.

Assist in risk pricing and capital allocation.

Facilitate portfolio management and monitoring.

For the rated MSME, an ICRA MSME Rating may help to:

Improve the comfort level with prospective/existing lenders.

Negotiate better terms on the basis of the credit quality reflected by the Rating.

Reduce the time involved in obtaining loan approvals.

Project a better image to prospective/existing trade partners.

Carry out self-evaluation and take timely and corrective measures for improvement.

ICRA is one of the leading credit rating agencies in India, with a sound understanding of the MSME sector and its “real world” dynamics. It offers its MSME rating services in two ways:

ICRA Limited along with National Small Industries Corporation Limited (NSIC) has launched a Performance and Credit Rating Scheme for Micro and Small Enterprises (MSEs) in India on a special Rating Scale, using criteria tailored for the small-scale sector. The Rating service is aimed at enabling MSEs improve their access to institutional credit, increase their competitiveness, and raise their market standing. The Rating methodology covers credit and performance factors, including parameters that measure operating, financial, business and management risks. The fee for this Rating service is currently subsidized by the Government of India, making it a unique opportunity for micro and small enterprises to get themselves rated. The subsidy is available to an eligible MSE only once. The total subsidy obtainable is 75% of the Rating fee payable to ICRA, subject to the following turnover-linked ceilings: Rs. 15,000 for entities with annual turnover of up to Rs. 50 lakh; Rs. 30,000 for entities with annual turnover of between Rs. 50 lakh and Rs. 2 crore; and Rs. 40,000 for entities with annual turnover exceeding Rs. 2 crore.

In case the MSE client accepts the rating, then ICRA has the responsibility to upload sixteen data points in the first year of rating and five data points in the subsequent two years, related to the company in the specified format in the MSME Ministry’s website, as mandated by Ministry of MSME1.

Rating Fees
(Unites with audited results of one complete year of operations)

(Rs.)

< 50 lakh

50 Lakh to Rs. 2 cr

> 2 cr

Rating Fees

40,000

45,000

55,000

Add: Service Tax @15%

6,000

6,750

8,250

Total Fees

46,000

51,750

63,250

Subsidy from NSIC

15,000

30,000

40,000

Amount payable by MSME

31,000

21,750

23,250

ICRA Special Price

12,000

12,500

17,000

* Any enterprise registered in India as a Micro and Small Enterprise and not rated earlier under this scheme is eligible for this rating. We mandatorily require UAN/UAM (Udyog Aadhar Memorandum) Registration Certificate for offering rating under this scheme.

2. Authority letter to sign the application form and provide required information, if the application letter is signed by person other than the proprietor / partner / Director of the applicant entity.

3. Copy of the audited accounts for the last three years along with Tax Audit report (Form 3 CB and 3CD) (where accounts for the last year have not been audited, provisional accounts duly certified by a Chartered Accountant, along with two years audited accounts, are to be submitted).

3. Details of capital expenditure proposed for the next three years indicating amount for new facilities, modernization, replacement and expansion including project feasibility reports, if any, for major projects.

ICRA has developed a separate SME Rating Scale that covers all MSMEs, including those that are eligible for the NSIC-ICRA Performance and Credit Rating Scheme. While Rating SMEs (including Micro Enterprises), ICRA evaluates factors such as the candidate SME’s management, ownership, organisation structure, key human resources, business environment, relationships with trade partners, financial strength, operating efficiency and capabilities, and other non-financial parameters that may have a bearing on its creditworthiness. Among other things, an ICRA SME Rating seeks to bridge the “information gap” that a lender may face while evaluating a credit proposal made by an SME. The ICRA SME Rating Scale is linear, which makes it easily comparable with the internal rating scales of most banks.

1. Authority letter to sign the application form and provide required information, if the application letter is signed by person other than the proprietor /partner / Director of the applicant entity.

2. Copy of the audited accounts for the last three years along with Tax Audit report(Form 3 CB and 3CD) (where accounts for the last year have not been audited, provisional accounts duly certified by a Chartered Accountant, along with two years audited accounts, are to be submitted).

3. Details of capital expenditure proposed for the next three years indicating amount for new facilities, modernization, replacement and expansion including project feasibility reports, if any, for major projects

4. Any exposure to forex derivatives and MTM position (attached format in AnnexureII)